Permitted Infrastructure Investments for Insurers

Summary#

This is a proposed rule, published in the Canada Gazette on February 11, 2023, that would set the details for a new investment permission in the Insurance Companies Act. The Regulations for Permitted Infrastructure Investments would let certain federally regulated insurers take large, lasting equity stakes in companies that own or operate public infrastructure, subject to rules and limits.

What it does#

• Defines what counts as a “permitted infrastructure entity” (PIE) and what physical assets a PIE can own or operate. The list covers 10 broad categories of long-lived public assets (transportation, water, waste, agriculture, flood protection, ICT, energy, health & housing, education/recreation, and some public buildings).
• Allows federally regulated insurers to acquire control of, or a substantial equity stake in, a PIE and hold it indefinitely. This is different from current temporary exceptions that force insurers to sell after a set time.
• Requires that a PIE or the infrastructure it deals with “involve” a public body at the time the insurer first invests. Public bodies include governments, Crown corporations, municipalities and Indigenous governments, among others.
• Sets a rule that if a PIE operates an asset, that asset must be wholly owned by the PIE (or by a non‑affiliate), preventing insurers from hiding ownership in non‑PIE affiliates.
• Requires that one purpose of the investment be to help the insurer match its assets to its long‑term liabilities (asset‑liability matching).
• Caps a single insurer’s total exposure to PIEs at 20% of its regulatory capital when it first makes the investment. If exposure later exceeds that limit, the insurer can keep existing PIE holdings but cannot increase exposure.
• Leaves ongoing supervision and prudential checks to the Office of the Superintendent of Financial Institutions (OSFI).
• Is a proposal (Part I publication). The Gazette notice invited comments for 30 days after publication on February 11, 2023.

Who's affected#

• Federally regulated life insurance companies, fraternal benefit societies, and insurance holding companies are the primary groups affected.
• The Department of Finance developed the proposal in consultation with industry groups such as the Canadian Life and Health Insurance Association (CLHIA) and major insurers.
• Public bodies (federal, provincial, municipal and Indigenous governments) could be partners or counterparties in projects that insurers invest in.
• It is unclear from the notice whether provincial or provincially regulated insurers would be affected; the proposal applies to entities covered by the federal Insurance Companies Act.

Why it matters#

• The rule aims to give insurers a stable way to invest in long‑lived public infrastructure that can match the long time horizon of some insurance liabilities (like annuities). That can make insurers more financially resilient and better able to pay future claims.
• It could unlock a new pool of private capital for public infrastructure projects in Canada, adding to federal programs such as the Investing in Canada Plan (noted in the notice as $180 billion over 12 years) and the Canada Infrastructure Bank’s $10 billion Growth Plan. The notice also referenced planned federal transit funding of $3 billion annually beginning in 2026–27.
• The rules include limits and safeguards (public‑body involvement, ownership rules, and the 20% exposure cap) intended to keep insurers focused on insurance and limit prudential or market‑dominance risks.
• The government said it did not identify material added costs or major prudential risks from the change, and that OSFI would continue supervision.